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Monday, 19 May 2014

ParkingEye win Cambridge test case

The judgment for the Cambridge test case was delivered by HHJ Moloney today in Southend at 10:00am.

He ruled for ParkingEye in both cases, explaining his judgement as follows.

The charges WERE penalties, but were commercially justified.

There WAS a contract in a free car park. The consideration from the motorist was the promise to leave after 2 hours.

ParkingEye DO have standing to bring the case in their own name. They were principals, not agents

Prankster Analysis

This is a very interesting decision because it opens the doors for other industries to start charging what they like as penalties.

For instance, medical booking agencies representing GP's could charging £100 for not attending appointments. Hotel booking agents could charge 20 times the room rate for a failure to turn up or cancel on time. The legal arguments would be identical.

However, the BPA code of practice still requires that charges be a genuine pre-estimate of loss, and so any parking company must still abide by this or risk loss of access to the DVLA database.

HHJ Moloney admitted he was trailblazing here. This is the first judgment where consumers have been ruled against on the grounds of commercial justification.

The decision that parking chaos would result if these charges were not allowed is surprising, and flies in the face of evidence from other car parks where lower charges are imposed and chaos has not resulted. No hard evidence was offered from either side that the removal of ParkingEye would result in a loss of income to the landowner. The Prankster does know that B & Q terminated the ParkingEye contract, and suspects that aggressive enforcement was the overriding cause. The Prankster suspects B & Q were happy to pay ParkingEye's penalty clause to terminate early, and estimates that they would not have done this unless they lost huge sums - perhaps even 6 figures, due to losing customers who then never returned and shopped elsewhere.

Certainly one of the defendants in this case has never used the retail park again, and The Prankster knows of other people who have paid ParkingEye's penalty charges and never returned to the shops. ParkingEye's gain is therefore the retailers loss.

The decision that ParkingEye was the principal was surprising. However HHJ Moloney's reasoning is interesting and it is clear that this is a special case, only relating to this car park and others where ParkingEye pay £1,000 a week.

Therefore, in most other claims made by ParkingEye, and indeed perhaps other car park operators, the decision of this case is easily distinguished. Thus, this might not turn out to be the 'test case' that HHJ Moloney hoped for; instead a judgment only applicable to a few car parks.

The key phrases in the judgment are, in The Prankster's opinion;

5.7 Here, it appears to me that the financial provisions of this contract give the best clue to its real nature so far as the question of principal or agent [...] ParkingEye is paying the landowner for the valuable privilege of being able to run a car park for ParkingEye's own profit. Moreover, as the Claimant points out, [...] the landlord does not take any percentage or other direct share in the sums received by ParkingEye and is not even entitled to an account of them.

Thus, we can easily distinguish most of the other car parks ParkingEye runs because:
1) ParkingEye does not in general pay a weekly rate to the landlord
2) In many cases, such as Corporation St Preston, the landlord does take a percentage of the parking charges (15%)
3) In most car parks, the landowner is entitled to an account of the charges, and indeed is required to have an account of them. This can be shown in two ways. Firstly, ParkingEye supply their customers with a web logon, where they can see the charges issued. The Prankster has shown screenshots of these before in previous blogs. This is normally detailed in clause 8.1 of their standard contract.

8.1 [...] ParkingEye shall notify the Customer of the web address for accessing the website in order for the customer [...] to monitor the data generated at the Site

It is not known why HHJ Moloney missed this clause. Perhaps it was redacted in the contract given to him, or perhaps this site has a different contract to the usual.

The second way the landowner is entitled to an account of the charges is more fundamental. On most of their sites ParkingEye collect the charge for breach of contract as an agent on behalf of the landowner. They then keep this money as a service charge, but this gives rise to a VAT liability. ParkingEye therefore raise a VAT only invoice to the customer. Thus, the customer knows exactly how much money ParkingEye is collecting every month, because they have to pay VAT on it.

This is detailed in clause 3.11 of ParkingEye's standard contract.
3.11 The Parties acknowledge that the Revenue from the Charges retained by ParkingEye is consideration for the Services and that the supply of the Services attracts VAT at the standard rate. As such ParkingEye will generate a monthly VAT only invoice to the Customer to reflect the additional amount to be paid in VAT in respect of the monies received for the Services. The Customer agrees to pay all such invoices within thirty days of receipt on the Due Date

It is not known why HHJ Moloney missed this clause. Perhaps it was redacted in the contract given to him, or perhaps this site has a different contract to the usual.

It seems then that this decision is of limited use to ParkingEye. It is only applicable to a small minority of car parks and moreover it does clearly establish that the charges are penalties. The fact that there was found to be commercial justification in this case can be challenged on legal grounds in other cases because this is a still a small claims decision with no previous consumer-based case law and is not binding. It can also be challenged factually, since it is perfectly possible to run a car park business in other ways which do not require penalty charges.

An interesting decision. It's a cop-out by HHJ though. He will know that the chance of an appeal against this is unlikely whereas a loss by PE may well have been appealed further to get some sort of High Court decision. It's a wasted opportunity at best.Now, it seems that PE's payment for the privilege of operating the car parking facility is seen to be akin to a lease. That being the case then as leaseholder they will be responsible for the business rates of the car park.

Whatever the take on their role, only a genuine landowner/leaseholder will have any right to claim directly as priniciple against any driver found to be contravening the conditions of use of the car park. This is worthy of being put to the local authority as the car park will be rated as a nil hereditament agreement as part of the whole development rates. It's clearly been shown to be otherwise by a court. I do think a well placed appeal would be worthwhile however the cost of it would be insurmaountable for the average driver so doubt that it will be done. If it had wider implications it would be worth seeking funding from PPP and other forum members and I for one would be willing to chip in. I'm sure all the people who have made pledges against VCS action would agree to their pledge being used in this way too.

Now, VCS.....They also pay the airport a monthly amount. I can see vast differences though as they aren't claiming for a breach of parking conditions since they only go after people on the airport roads. Completely different so if they feel any sort of euphoria from the PE win they can forget it.

"ParkingEye Ltd is solely engaged to provide a traffic space maximisation scheme. We are not responsible for car park surface, other motor vehicles, damage or loss to or from other motor vehicles or user's safety"

I guess it might be very difficult to square this statement with being a principal as opposed to an agent.

I agree. Who does the motorist sue if he slips and injures himself on a bad surface? Who sues for eviction if a burger van turns up and refuses to leave? Who does is disabled driver sue if there are never any disabled bodied parking spaces available because able bodied motorists use them? The answer seems to be the landowner in every case.

A principal cannot be excluded from a 'user's safety' under the UTCC 1999. However, if contested in court, only the clause excluding the user's safety would be struck from the contract i.e. it would not invalidate other terms deemed to be incorporated in any contract.

It does occur to me that if PE are acting as an agent in some car parks and principal in other car parks their signage should reflect their status accordingly.

HHJ Moloney has driven a coach and horses through consumer protection law, purely because PE have opted to operate a business that cannot survive without them having the ability to levy penalties against consumers.

Methinks there is a hidden sting in this tale. PE now have no option but to justify their charges as "penalties". Not sure I would want to build a business on a strategy which could firmly bite the rear end if this gets overturned later on - "penalties repaid, and compensation, anyone?"

What sort of money? The problem is not the cost of the court case itself, it is the problem of being liable for costs of the other party - so the appellant can be as cheap and cheerful as they like to fight the case, the other party can stuff their side with barristers and if you lose you get to pay.

However, it is possible to get an appeal where it is agreed that costs will not be given (as long as all parties act reasonably). In this case, as it came from the small claims court where costs are normally not given and there is a public interest in the decision and it is private individuals vs a company, it might well be possible to get a costs order that protects the appellant - I would argue it would be unjust to do anything else.

Interesting one as PPC's have gone to great lengths to show that these are not penalties.

One wonders if HMRC are going to investigate PE's accounts for back-dated payments of VAT? Will invoices now state that the parking charge includes VAT?Will the new amount being charged be £100 + VAT?Will PoPLA now have a get-out clause for nulifying GPEOL?

Car Park ChargesIf the contract under which car parking is supplied allows for an extension of the original terms, for which additional consideration is payable, the liability of this consideration follows that of the original supply. However, where a car park operator makes an offer of parking under clear terms and conditions, setting punitive fines for their breach, the fines constitute penalties for breaching the contract, rather than additional consideration for using the facilities. Consequently, they are outside the scope of VAT.

They are not penalties though as stated by HMRC. Most of the signs in the car parks/land clearly state " you agree to pay." To me, this indicates an acceptance of an invitation to treat. This has to be proved as it's not absolute liability. Any judge worth their salt would know that, or they should be in the job.

All the cases on hold until this result haven't been done any favours at all. They are probably subject to a completely different PPC landowner contract. That being so PE has no chance of winning them based on HHJ's contemplations.

It may be a bit late in the day, but I'm a litigation solicitor in London and would be interested in potentially assisting with an appeal on a no win-no fee basis if an appeal is still under consideration. The only costs to cover then would be court fees (modest) and the potential exposure to having to pay PE's costs if the appeal fails (potentially rather more substantial). If interested, please reply on here and let me know who to contact.

About Me

The Parking Prankster is dedicated to putting the fun back into parking. Sometimes there is a serious side too, as the prankster highlights scams and ruses used by the darker side of the parking industry to part you from your money.
Please contact me with parking stories you think would make interesting blog posts either via email prankster@parking-prankster.com or my twitter feed, @ParkingPranks